Wheat and Chaff

Saturday, October 11, 2003

Free Trade woes

A new anti-free-trade movement is emerging in the U.S., comprising highly skilled workers who once figured they would be big winners in the globalized economy but now see their white-collar jobs moving overseas in growing numbers.

The new opponents to lowering trade barriers are especially vocal, and their complaints already are getting the attention of Congress and the White House. Their concerns got an unexpected boost Thursday when Intel Corp. Chairman Andy Grove, a pioneer in the American high-tech industry, warned that the U.S. could lose the bulk of its information technology jobs to overseas competitors in the next decade, largely to India and China.

Virtually any analysis will show you that free trade always helps both sides of the deal, as long as it is unrestricted by governments. There are always local disruptions, as in the case of these workers. But ultimately, those who protest the effects of free trade usually end up promoting their own narrow interests, rather than those of the nation as a whole. The article says that 2/3 of the economic impact of losing these jobs flows back to the nation in the form of lower prices. And that's just the immediate impact. There's also the economic benefits of competitive pressure on the efficiencies of our industry, the benefits that come from shifting resources into more productive lines of work, and such less tangible benefits that are more difficult to measure, but very real nonetheless.

This is what made American industry so powerful, and kept us from becoming stagnating state-driven economies like Europe is full of these days, and like Japan has become (how long has it been since you heard anyone worrying about Japan taking over the US economically?). Our own efforts at protecting local jobs and industries (steel, airlines, autos) have typically done those industries more harm than good, as we shelter them from competitive pressures until those industries became less and less capable of competing on their own and require more and more taxpayer-funded interventions by government to save them, driving up consumer prices and hurting the economy overall. That's the question these tech workers need to ask themselves- is it right for the government to use taxpayer dollars to keep these jobs here and drive up prices for the consumers, just to make their lives easier?

I am sorry for people losing jobs in the tech industry, and others. I hope they can adjust quickly. But the best way we can ensure that we have an economy where they can do that, is to allow these things to take their natural course.